Mains Paper: 2 | Governance
Prelims level: GST Councils.
Mains level: The GST Council does well to focus on the concerns of small firms.
• GST is an indirect, multistage, destination-based tax levied on every value addition.
• The Goods and Services Tax Council on the 5th of August.
• This time there were no rate changes.
• The Council’s focus at its latest meeting was on issues facing micro, small and medium enterprises (MSMEs).
The Constitutional Framework
• Article 279 (1) of the Indian Constitution states that the GST Council has to be constituted by the President.
• GST Council is a joint forum for the Centre and the States.
• It consists of the following members:
• The Union Finance Minister, chairperson.
• The Union Minister of State in charge of Revenue of Finance.
• The Minister in charge of finance or taxation or any other Minister nominated by each State government including Delhi and Puducherry.
• Costs for the council are completely taken care of by Central Government. The meetings of the GST Council has a quorum of 50 percent Decisions can be taken with at least three-fourth weighted majority voting for a resolution.
• The centre has have one-third of the votes.
• The states together have two-thirds of the votes.
How GST is benefitted to India in MSME Sectors?
• GST has expanded India’s tax base and brought more companies into the formal economy.
• Revenues have reduced after peaking at ₹1.03 lakh crore in April.
• The rate cuts on several items in the last Council meeting came in to effect from July 27 so the full impact on revenue collections will take more time.
• The revenue loss from the most recent tax cuts may even lead to 0.04-0.08% of GDP loss annually.
• However, this is marginal and may be compensated by stronger consumption growth and better tax compliance.
Following measures need to be taken by Govt.
• GST council has set up a ministerial group to look into the problems faced by MSMEs since India moved to the GST regime last year.
• This sends a signal that the government is willing to tackle the implementation issues that still trouble smaller players.
• Companies with an annual turnover of less than ₹5 crore constitute 93% of the registered taxpayers under the GST.
• In the previous meeting, the Council had decided that such companies no longer need to file complex returns every month, but only on a quarterly basis.
• The ministerial panel may recommend further easing of compliance for micro firms far less than ₹5 crore and enhancing the ₹50,000 cap for mandatory use of e-way bills to track the movement of taxable goods.
• The Council meeting used the consensus-based approach to decisions.
• Some States had problems on the proposal to increase digital payments by offering a cash-back to consumers using RuPay cards or the UPI platform.
• Now States will volunteer to run a pilot programme and a final decision will be taken after a detailed evaluation.
• This indicates the Centre cooperative approach with States.